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Tuesday, November 27, 2007

Fannie Under Fire Over Accounting Change

Three years after a stunning accounting scandal that forced it to restate earnings by $6.3 billion, the giant government-sponsored company that buys and sells home loans is on the defensive over a change in how it calculates potential losses from the growing mortgage crisis.

The fear among investors is that a new accounting methodology masks the number of bad loans held by Fannie, downplaying potential losses.

Shares of Fannie, the largest U.S. player in the market for mortgages that packaged into tradable securities, tanked for the second straight day on Friday, even as executives tried to assuage skeptical Wall Street analysts on a telephone conference call.